Can the European Common Market serve as a model for Asian regional organization? The European Community is a historically unprecedented endeavor, and to date, a rather successful one. As you know, the European edifice is built on three pillars: a single market, a single currency and a developing political union. As far as Asia is concerned, I would suggest the following transpositions: Yes to a single market. Possibly yes but only in a distant future to a single currency. And probably no to a political union.

Compared to Europe, one sees in Asia three major differences: The first is the inversion of the classical center-periphery relationship. The process which started in Europe started from the nucleus, that is from the Franco-German union, and extended itself outward in successive circles; it cannot be transposed as such to Asia. In Asia the periphery has been much more active, up to now, than the center. With less than one third of the population, Asia's periphery produces 85% of Asia's total economic output.

Second, the success of the EC is largely based on the balance of power between individual countries. The difference in Asia is the predominance of the Japanese economy. Taking into account only the market economies, Japan represents 80% of the total GNP of the area. In terms of per capita GNP, the contrast is also significant, with a figure of US$25,000 per head in Japan, compared with US$5,000-10,000 in Korea and Taiwan and less than US$1,000 in Indonesia and the Philippines. [The figure for mainland China is also less than US$1,000.]

The third difference is that the most important trading partner for each EC country is the other EC countries. For each member country intra-EC trade represents over 50% of its total trade, and this proportion is constantly increasing. In Asia, even if Japan is the largest trading partner for many other Asian countries, trade is more diversified. For instance, half of Taiwanese exports are directed toward the American market. Asian economies are building market shares in North America, in the Pacific zone, especially in Australia, and in Europe. Intra-Asian trade represents only 4O% of the total trade.

Basically this means that Asian economies have more to benefit from the global liberalization of trade, rather than regional. Therefore I would suggest that, probably, in Asia, one should aim at a free trade area widely open to worldwide competition, rather than to a common market. Thus Asia would create a dynamic movement through which its economies would benefit first from regional free trade, before moving to full integration in the worldwide trade system.

It's time for Japan to put something back

Kabun Muto, Member of the House of Representatives of Japan, chairman of the Research Commission on the Tax System of the Liberal Democratic Party and former Minister of International Trade and Industry

My country is often praised for achieving a so called "economic miracle." This praise can no longer be limited to Japan, however, for the nations of the Asia Pacific have realized economic miracles in their own right.

Several key factors have helped to promote the impressive growth rates in this region. First, there has been the U.S. security presence. The countries of the Asia Pacific have been, for the most part, spared the burden of the costly arms race. Second, the United States as well as Japan has provided lucrative export markets for countries in this region. The U.S. was particularly generous in the postwar years, keeping its markets open to products from Asia and giving nascent industries in the region a chance to catch up. Third, the United States, and later Japan, injected huge amounts of capital into the region and undertook massive levels of direct investment. This has facilitated the development of export-led industrialization here.

I am concerned about the tendency towards economic "blocism" now creeping across the global landscape. This trend threatens to take us across a very slippery slope. In the 1930's, economic integration among nations meant economic blocs with discriminatory trade practices. It was a period of prolonged economic stagnation. I hope we have learned the hard lessons of the past and that regional economic integration should strive to promote world trade and economic growth. While perhaps beneficial for some countries in the short run, blocism which suppresses global trade will hurt us all over time.

I am of the opinion that Japan should play at least two key roles in this region. First, it should assume a kind of watchdog function, guarding against policies and plans that hinder free and open regional and global trade. Japan has a responsibility to do its utmost to help bring the Uruguay Round [discussions for the General Agreement on Tariffs and Trade] to a successful completion. Once this is done, Japan, together with its trading partners, should work to establish guidelines for regional economic groupings that reinforce rather than diminish the free trade principles of the GATT.

Japan's second key role should be to vigorously promote economic cooperation in this region.

Japan has been a major beneficiary of the free trade system. The time has come for us to take greater initiative in protecting and promoting that system. We are the second largest economy in the world. We must assume the responsibilities that come with that position. I am firm in my belief that what we do today in this region--in our economic policies and in our commitment to growth through free trade--will have a great impact on the shape of tomorrow's world.

The tripod is not necessarily the most stable

Lee Hsien Loong, Deputy Prime Minister and Minister of Trade and Industry of the Republic of Singapore

One sign that the trading system is under strain is the increasing emphasis in many countries on "fair trade" rather than "free trade." From the point of view of economic theory, fair trade is not a useful concept, because countries benefit from free trade whether or not their trading partners also do so. If your trading partner is "unfairly" subsidizing a particular industry, your best strategy is not to try to match his subsidies in order to keep your own corresponding industry alive. Instead you should take full advantage of his subsidies by importing cheap products from him and shift your own production into other business areas which he is not subsidizing.

How then is the world trading system likely to develop? It is not realistic to expect an ideal system of completely free trade to emerge, because political considerations cannot be wished away by any government. The trade negotiations must aim for the best practical solution in a non-ideal world. The Uruguay Round has made considerable progress in many areas of the talks, such as services, dispute settlements and intellectual property rights. However, an overall settlement has been held up by one outstanding thorny problem--agriculture.

If the Uruguay Round succeeds, we can expect more orderly rules to prevail, faster expansion of trade and gains all around. But if it fails, though we will probably avoid the worst possible outcome in which countries revert to beggar-thy-neighbor policies, because leaders have learned the lessons of the past, less unlikely is the possibility that the global system will break up into three trading blocs --one in America, one in Europe and a third Asian bloc. These are the natural fault lines. But a three way spilt will not yield a viable and stable configuration. The global economy has already become so interlinked that the proposed blocs cannot possibly become economically self-sufficient except at great cost.

Second, a three-bloc world will not eliminate trade frictions. Competition within each bloc will still force countries to make painful adjustments from time to time. In Europe, French and German workers have to compete against Spanish and Portuguese ones willing to work for a fraction of their wages, let alone against the hungry and unemployed workers from the former communist countries of Eastern Europe. Already American fears that cheaper labor and lower environmental standards in Mexico may lure American jobs and industries are holding back progress in the NAFTA [North American Free Trade Area] negotiations.

The Asian countries have benefited greatly from the multilateral trading system, and have contributed commensurately to its growth and success. Their collective influence on the world trading system is not negligible. They should exercise this influence to help bring about a good GATT agreement.

Eliminate mutual resistance

Rafidah Aziz, Minister of International Trade and Industry, Malaysia

It is important for us to be clear in our minds that regionalism is not "blocism" or the creation of trade blocs. The emergence of regional economic groupings is a necessary requisite to the internationalization of an economy. Although the attraction of major markets elsewhere may provide greater impetus for economic activities that lead to greater export earnings, the fact remains that economic cooperation at the regional level has a greater chance of early success.

We have before us an economic scenario in which an analysis of economic linkages regionally tends to project one common factor--the direct or vicarious influence of Japan in the chain of linkages. Japan's increasing economic competitiveness has either been a source of inspiration or a source of irritation. The spectre of economic colonialism is often raised when the Japanese economic presence is pervasive. But the beneficiaries of Japanese investments, such as the countries of Asean, have invited Japan into their midst with their eyes open. Their own democratic and value systems do not allow any of them to tolerate any form of economic domination by anyone.

There is fear that Japan will have a dominating role in any East Asian economic grouping, and with the whole of East Asia with her will therefore be more "confrontational" vis-a-vis other countries and regions. But in fact, the worst nightmare of other East Asian nations would be to see GATT fail to liberalize trade and witness the developed countries raise trade barriers and increase protectionism. Having reaped the benefits of free trade, East Asian nations are not about to take retrogressive steps to form or create trade blocs. It would be the antithesis to their very survival. Whatever they undertake as a regional initiative must necessarily be premised upon being consistent with, and contributing to, more liberal, multilateral trade.

A golden future for a Chinese triangle?

Paul S.P. Hsu, Professor of Law at National Taiwan University and senior partner at Lee and Li, Attorneys-at-Law

When speaking of the continuing development of the Asia-Pacific region or the advent of the "Pacific Century," the "Chinese Productivity Triangle" composed of Taiwan, Hongkong and coastal provinces in southern China, cannot be ignored. The fact is that Chinese based economies move rapidly over political boundaries, resulting in a "borderless economy." Fundamentally, the private sectors of the various economies in the Triangle have joined together to move ahead across political boundaries to form an integrated regional economy outside the purview of the government. Indeed, it is an autonomous and energetic private sector which continues to serve as the primary engine running development of this economy.

Moreover, economic growth can open the door to outside influences which eventually supersede political forces. Even now, the economic strength of the coastal provinces is eclipsing the central government's influence over China's periphery. Where some may find this view to be rather striking, a similar scenario has already been acted out in Taiwan, where economic growth has already made old-style politics obsolete. Free-market economics expanded into free market politics.

If we could play the role of a historian in the year 2042, looking back on the area of the Chinese Productivity Triangle, what would we expect to see has happened in the last 50 years? We would probably note that the trends starting in the 1980's, i.e. the loosening of trade and investment restrictions, continued as mainland China gradually opened up. Development spread from the southern coastal provinces to the North and through the interior. China was transformed, the "Sleeping Dragon" awoke, jolted from its long slumber by the calls of two of the "Little Tigers," Hongkong from within and Taiwan from the outside.

[Picture]

National Growth Rates for the Asian Region, 1988-1991

Source: Collected Data for the Asia-Pacific Region published by the National Policy Center

A Comparison of the Three Major Economic Regions (1988)[Picture]

Refers to Japan, Korea, the R.O.C on Taiwan, Hongkong, Singapore, the Philippines, Indonesia, Thailand, Malaysia, New Zealand, Australia and Mainland China.

The free-trade area composed of the United States, Canada and Mexico.

Source: Taiwan's Pacific Strategy, published by the National Policy Center

Valery Giscard d'Estaing.